The Failures of U.S. Globalization

Editor’s Note: Pat Choate has provided EconomyInCrisis with a summary of highlights from his upcoming book “Dangerous Business: The Risks of Globalization for America,” to be released on August 12, 2008. “Dangerous Business” is a wake-up call about the perils of unfettered globalization. It tells how America can remain prosperous, sovereign and secure.

After the collapse of the Soviet Union in 1989, the world’s toughest geo-political question was how to integrate into the global economy the 4 billion people who had been long separated from the West by their political systems, which were primarily communist or socialist. The United States, Europe, and Japan chose the solution now termed “globalization.”

The United States’ first major step towards globalization was ratifying the North American Free Trade Agreement (NAFTA) in 1993. The second step came in 1994 when the U.S. joined the newly formed World Trade Organization (WTO), the principal institution of globalization.

By joining NAFTA and the WTO, the United States radically altered its economic policies with other nations. This new approach made corporations wealthy when they transferred their manufacturing and service work to nations with penny-wage labor and weak environmental laws and worker rights; it threatened bankruptcy for companies that kept their production and jobs in the United States.

The unfettered global trade regime created under these two pacts shattered the way value-added is shared between capital and labor in the United States, overturning agreements forged over a century of elections, debates, strikes, lockouts, and other hard conflicts. Unfettered trade policies have divorced the interests of corporations and finance from those of the larger U.S. society and fostered the creation of a business elite that owes allegiance to no country.

The consequences of these new policies have been quick and devastating. Income and wealth inequality is approaching levels last seen in the 19th century. Millions of workers are being forced out of the middle class. Between 1994 and mid-2008, the U.S. mounted a cumulative trade deficit of more than $5.6 trillion, which represents the largest unilateral transfer of wealth in world history. To pay for these deficits, the nation is borrowing and liquidating assets worth more than $2 billion per day, forcing the federal government deeply into debt with foreign lenders, notably the governments of China, Japan, South Korea, and Taiwan, which hold almost half of the U.S. government’s external obligations.

The consequences of these globalization policies extend far beyond issues of economics and national prosperity. They are also diminishing U.S. sovereignty and security.

By joining the WTO, the United States agreed to subordinate its laws, regulations, and administrative procedures to the rules of that body. At the WTO, any of the 151 other members can legally challenge any U.S. federal, state, or local law as “trade impeding.” If a WTO panel in Geneva, Switzerland, operating in secret, rules against the United States, the only appeal is to another WTO panel. If that panel sustains such a ruling, the U.S. must either change its laws or pay compensation to the plaintiff nation. As Dangerous Business documents, these costs can be great and the consequent changes to U.S. law significant.

Under globalization, the U.S. also has abandoned its two-century old policy of relying as little as possible on other nations for the manufactures necessary to the national defense. Instead, the Department of Defense now encourages contractors to seek foreign suppliers, including for the most advanced technologies such as the recently controversial U.S. Air Force contract to buy tankers from Europe’s Airbus Industries. Increasingly, foreign producers are the only source of supply for many items, while the U.S. defense industrial base withers away.

Pat Choate is an economist, author of eight books and was the 1996 Vice Presidential running-mate of Ross Perot for the Reform Party. Choate received his Ph.D. in economics from the University of Oklahoma. Choate's new book "Dangerous Business: The Risks of Globalization for America" will go on sale August 12, 2008.

Front Page Photo by cweed- Flickr © Some rights reserved

Click Here For Solutions To America's Economic Problems

Click here to contact your Representative in Congress.

Spread this message with Digg, Del.icio.us, Reddit, or Stumbleupon, and subscribe to the RSS Feed to track articles